Amazon & Your CPG Products – a Discussion with Joshua Blake – Episode 12

This is CPG Insiders, the podcast that.

Helps consumer packaged goods companies survive and thrive in business. Now, your hosts, Mark Young and Rob Taylor. Welcome, everyone, to this edition of CPG Insiders. I'm your host, Mark Young, with my partner in crime sitting next to me, Rough and Tumble Rob Taylor.

Good morning, everybody.

And it's funny that when you think about.

Because it's 4:00pm well, that.

But you think about the initials of Rob Taylor and Rough and Tumble are.

Both RT lines up perfectly.

It does, doesn't it?

It's almost fortuitous.

It is.

Well, Rob, we are going to talk about all things Amazon today.

I love Amazon.

Are you a big Amazon shopper?

Big Amazon shopper. Every day. I buy something new from Amazon almost every day. Literally almost every day.

Must admit that there are many packages at my house from Amazon and it's hard to pass up. And what we're dealing with today is Amazon. Currently, when you look at Amazon and you look at the CPG business, Amazon has roughly about 5% of the market. So you think about that. It's like, okay, so it's not a deal killer, but it's a growing piece of the business. And it's a piece of the business that every CPG marketer needs to get control of.

Yeah, it used to be ignored as a, you know, if you were looking at numbers, it used to be, you know, what are we doing at Walgreens? Yeah, nobody cared. Nobody cared. And now it is a huge factor.

So, Rob, we have a friend to the agency on today, and his name is Joshua Blake. And Joshua specializes in all things Amazon, Jet, digital, all those things. So, Joshua, welcome to CPG Insiders.

Thanks for having me today, Mark. It's great to be here.

Now you do. Besides for Amazon, you're also doing like, Jet, which is owned by Walmart. Do you also do stuff on Walmart.com what about stuff like Walgreens.com, what about those platforms? Are you working all of those?

Right now we're doing, obviously, Amazon. We do ebay, we do Jet, as well as walmart.com we've got a couple smaller niche sites of our own that we do, but obviously that's a small portion of what we're doing right now. Over the last. Well, since the first of the year, Jet has also changed. They initially came out as more of an open marketplace. They didn't really say that in the press, but that was more or less what they were. You know, you submitted listings and as long as there wasn't an issue with imaging or information in the listing or pricing issue, when compared up to Amazon or other big box retail e commerce sites, they would allow that less listing to go active. So we got a situation now where they kind of close things down. They're treating themselves similar to a Macy's or somewhere like that.

So if we were to look at order of importance, I'm sure Amazon is the most important site that CPG marketers need to get a control of. If we were to look at Amazon, what, you know, if Amazon was a 10 story building, how many story building is Jet? Is Walmart, is eBay?

Six months after jet came out, I would have told you Jet was a three story building. And now to us probably they're ground.

Level, their basement now.

They'll be after me now. No, Walmart's probably a third story. You know, three stories. You've got, you know, you've got a lot of individuals out there that still have a kind of a thing about being with Walmart. So, you know, using a third party company, you know, like us to sell on Walmart, they really like the idea of that and not selling directly to Walmart. So they still have a lot more control of their product than they would with someone like a Walmart. So ebay, it's probably a one story building. So obviously you can tell Amazon as a huge chunk of what we're doing.

Yeah, Amazon's clearly the category killer. Now what happens for a lot of companies? So a lot of companies, they have a product in Walmart, Walgreens, cvs, and they find that their product is being sold by a dozen different resellers on Amazon because they might be selling through Cardinal, they could be selling through McKesson. All their product shows up in all these sites. They have no idea how people are getting even buying their product and they lose control of their pricing because you have some of these guys that are out there, you know, putting $2 markup on something which now hurts them with the retailer. So I guess my question, I have a series of questions. One is why is this happening? Is there anything that can be done about it? And if so, what can you do about it?

Well, that is actually a big issue that we see and we hear it repetitively, is that the sellers come out and they show up out of nowhere and they've got generic names that, you know, in no way reflect who they are as a company. Nothing lines up. You can't, sometimes it's impossible to identify them. What we started to do is we work with some brands and some other things we work with. There's several investigative services out there now that are being used and we're working with a company that you represent right now. And we've been doing it on Amazon since the fall, but we're starting to now do it as well on ebay as well as Walmart. Notices get sent out, obviously compliant with Amazon standards, since it's their sandbox and people are. Information is requested from them to verify who they are, where they got the product, etc. You know, we're seeing right now, quite honestly that 70 to 80% of those sellers will just disappear within a matter of a week or so because they just, they're not going to deal with it. They see that they're dealing with a company that's a little more serious about their image and then you've got whatever, another 5 to 10% possibly that will go ahead and provide you with an invoice. And obviously when you see the invoice, you know exactly where it came from. And you can estimate at that point that they're not the only one that's found that leak in your distribution system. And then from there, you know, there will be a handful that just will not budge now.

And there's. I mean, some of these resellers are some pretty big operations.

Yes, some of the resellers you find are top 100 companies on Amazon right now. They've got large, large sales volume, you know, 80 to $100 million. Things of that nature. Yes, definitely. You know, not to mention, that's just, that's just.

I was gonna ask, you know, do the ones you shut down just go away and come back as somebody else? But if you're $100 million seller, you're not just going to do that. You're not gonna vaporize and come back as a different name.

Well, the trick of that is, Rob, is actually with your storefront, whenever you have a storefront on Amazon, you are actually issued a unique merchant id, and that's part of the URL. When someone logs onto your storefront, then they can use that ID to identify you, regardless of how many times you change your name. The funny thing is, some of these sellers do come back with a different name. And it kind of makes you laugh what they're trying to do with changing their name 10 times. But eventually they get the idea and a lot of them do go away. I would say 95% so far we're being able to get rid of any.

Feel for how much of this product. And I'm guessing maybe this is More of an ebay issue. How much of this product is stolen merchandise?

I apologize, I don't have any information on that. As far as numbers or new speculation. There's numbers that Amazon's put out or other firms outside Amazon speculating counterfeits and things of that nature.

I mean, we had one client where they kept competing with products on ebay and they eventually figured out it was coming out of their own warehouse.

Wow.

They had an employee that was pushing it out the back door and selling it on ebay.

Wow. One of the things we're seeing a lot of now is we're starting to see just as a ballpark, let's say that a product has a map of $25 and all of a sudden somebody jumps on there and they're selling it for $12, $14. But they're not using Amazon prime, they're fulfilling it themselves out of their own facility. A lot of times those are damaged products. Let's say it's a, it's a box that's got a corner that's damaged or something like that that Amazon would never process or allow to be sold as new on their website. And so they're selling actually what will be quote unquote damaged products.

So do you ever, does date coded stuff maybe show up in some of these environments also?

Yes, sir. You do get complaints from time to time from customers stating that, you know, they purchased this product and it got there and it was six months out of date and yada yada yada. And you do some research and find out they did not actually buy from you. Yes, we received this.

So my favorite is when they go to the website and they buy a damaged product or an outdated product, then they go to the manufacturer.

I was just going to ask, how does that reflect on the brand if it's the outdated sold by that third or fourth party seller?

Well, not well, because obviously the customer, the buyer sees that as that person selling that is a representative of the brand. And so that is, you know, black eye.

Now what's available to people in. I'm just going to stick with Amazon for the minute. What's available in the Amazon world to file complaints against companies that are selling your brand without your permission or using your logo or using your phone photographs or anything of that nature?

Yeah, obviously when we start working with brands, as long as they have a trademark, obviously we can recommend them initially to get brand registered and we do help with that process, walk them through that if they need any assistance. Most of them, you know, they have all their information, they're able to do that themselves. But by getting brand registered, what that allows you to do is actually gain control of your listings, control of your images, to where someone may take your image and create a new listing themselves, so on and so forth. But it allows you to control your listings, control the images, the information that's on the listing that may or may not be accurate or accurate reflection upon your brand. But it also allows that change. If you want to change your image, it allows it to be changed normally within 15 to 30 minutes, allows you to lock down your listings from other sellers being changed, as well as it allows you to file your intellectual property infringements, trademark infringements, or any counterfeit claims. And then the most recent one, obviously, is the addition of, in the last couple years of enhanced brand content. The enhanced brand content option is the description, per se, of when you're listing. You'll notice they're now more colorful. There's not just 250 words or whatever description of the product. A lot of these listings are now getting much more colorful, a lot of lifestyle shots and other things to try to really make that connection with the buyer. And the newest thing obviously is now they're allowing you to submit videos of the product. And that is another key, again, to make that connection with the buyer that's sitting behind a computer or sitting on their smartphone somewhere making that purchase. And that's a way to just make that connection.

Now, doing that brand registration, will that help get rid of some of these loose players also?

Often that's where the misconception comes in. Some people will say, you know, yeah, you can file intellectual property, you know, claims against them, but at some point, if you start doing that, at some point Amazon's going to start restricting your control of your brand. You know, if you, you're just filing intellectual property infringements against them, because on their end, all they've got to do is provide an invoice to Amazon directly, not to you, but to Amazon a lot of times, and they'll get them removed. And you've never really resolved the issue. You resolve the issue for two days, three days, a week, and then they're back. And obviously you want to try to do that the right way. And, you know, again, that's why we've taken some of the stances we've taken and so far it's been successful. There's a few, you know, larger sellers and things of that nature that we're working through the process to identify and cut them off. But you can get rid of probably 95% of them.

So some companies will decide to have their own Amazon page, some will decide to sell to Amazon, and some people will use, let's say, a third party company to represent them on Amazon. Could you kind of walk through the pros and cons of each one of those environments? What's, what's the upside? What's the downside?

The first one you mentioned was selling their product direct. You know, obviously if you sell that direct, you're going to have that direct interaction with the customer, which will be a great thing as far as disseminating information out to them. But at the same time, you know, that may be why these sellers wanted to use distributors and other things like that. They may have not wanted to interact directly with the customer. I would also mention that one of the things probably over the past 12 months has changed in the e commerce world is something a lot of people don't want to talk about right now, but it's sales tax legislation. And shortly after I started this company in 2013 and 2014, we started becoming compliant with pretty much every state we could. And you know, it became cumbersome. But as we grew, that burden didn't grow because we were already in compliance with it. So I would say if you're selling to a customer right now and you want to sell directly, I believe that that's also going to become a large liability moving forward as you run your business.

So if you're the direct seller.

Yes, sir.

And even if you're using Amazon to fulfill. But if you're the direct seller, you're responsible for all of those various sales taxes across the country.

Yes, sir. Maybe you should talk to the state of California. That's where you would get Nexus. The minute that Amazon moves your stuff into fulfillment center in California, you get Nexus. And they like to send letters too, even to people who are licensed. So we get a letter about once a year. We, you know, photocopy our license, sign the paper, send it back in.

I've been down this road before, especially when we did a lot of stuff with QVC and we had to get Nexus. It's called Nexus.

Yeah.

And it was, it was a mess. We were filing sales tax all over the country.

Amazon has modules though, where you can, you can buy there or subscribe or whatever, use their plugins to calculate it for you or you can handle it yourself.

But does Amazon process it or just calculate it?

Yeah, there's some states now, there's seven, eight or so that have what's called a marketplace facilitator laws that they passed. And so Amazon actually will collect and remit for third party sellers or, you know, again, even if these companies are selling themselves, you know, they will do that for them. But you still got your bigger states, your Florida's, your Texas, your California's. They have not passed a market facilitator law. So if you sell on there, you will do that. And we have softwares as well that we use and those softwares track and file that for us. But you know, once you get to a certain point there, you've got to file and pay monthly in a lot of these states. And that becomes, you know, that could essentially become a full time job for somebody if you go or 40 states.

Yeah, that can be quite a deal. Now, so let's talk about, let's say Amazon wants to sell my product direct. Amazon wants to inventory my product and sell my product. Is that a good route to go or am I better off to use, let's say, a third party provider to handle my product?

Well, obviously I'm going to tell you third party because I'm third party. But one of the biggest issues you'll run into if you go directly to Amazon is they don't sign pricing agreements. And so you're in a situation where if you sell directly to them, they'll sell it for what they want to. I can tell you a product a few years ago that we were selling that they ended up getting a direct contract. And on January 1st, that product went from selling for $90 down to $68.

So I've got a product with a $30 map.

Yes, sir.

And I'm trying to keep my numbers up because I'm in Walmart and Walgreens and CVS and Target, but Amazon buys direct from me. Amazon could take my $30 product, you're telling me, and put it out there for 22 bucks.

Yes, sir. I can show you a product right now that's got a $28 map. They're selling it for $19 and they're probably buying it for 17 or maybe a little bit more.

Now why does Amazon operate on such thin margins like that?

I guess what, that's just bee's ness.

And then on top of that, they're shipping for free, quote, unquote.

Yes, sir. Yes.

And it really creates a problem because, you know, when you sit with a buyer and I do this often you're sitting at a buyer at a Walgreens or a Walmart, the first thing they do when you're in the room is they bring up Amazon and look at what your product's selling for and you're in there telling them that it's a $30 retail and I'm gonna wholesale to you for 1860. And they're looking at you saying, well, I can buy it on Amazon right now for $21. Why would I put this in my store? Because I can't compete. So if we go to a third party seller or reseller and it's somebody that we have a real partnership with, not somebody that we're just selling, we can control some of that.

Yes, sir. Yeah. I mean Amazon looks for the volume, the velocity and obviously their customers, that's number one. They want the customer to be happy, they want them to have the best experience buying from them and they want their customer be happy with the price they see it at. And unfortunately that's often at the.

At.

The peril of the actual manufacturer, the brand owner. With a third party seller you get a little bit of a different relationship. And that is the biggest part that we tell people is find that brand that will truly represent you and truly be a partner to you that's going to respect your product. And the biggest key is I believe that if they'll treat your product as if it's their own. And that's a hard thing to do sometimes they're hard thing for some sellers to do. You know, they get to a certain point where they've got 20 or 30, 40 brands they need to treat that way. But there's a trust factor that goes in there and a partnership and really it's a shared interest for that brand to do well.

So tell us how a good third party partner would operate. What, what would they be doing for us? What would they provide?

Good third party seller would be someone that looks to improve your brand depending on the situation. Obviously they can look at your listing on Amazon and they can say, okay, the images may need upgraded to include actual product images as well as lifestyle images that include your product. They ought to be willing to run Amazon's pay per click ads. They ought to be involved in programs with Amazon such as the subscribe and Save or the Hazmat program or other programs that Amazon has that are semi exclusive programs to sellers that have great seller metrics and have proven themselves over the years. And that's a big part of it. There's other things we've ran into, we've ran into companies that you know, said, hey, one of our biggest things is we want you to pay up front, no problem. We do that if that's what they like. Some want term, some want. You know, there's a lot of variety of things. The big one is the unauthorized seller. And the thing we're running into now is we try to take a real, just a holistic approach. Instead of saying, okay, we'll buy your product at X price and then we want you to reimburse us so much for ads and we want you to reimburse us for this and we're going to add this service on and we want you to pay us for that. We just try to say, listen, here's what we can pay for your product. Or sometimes they'll say, hey, this is what we can sell it to you for. And we then tell them what all we can do for them. And we offer the same services to all of our brands we represent. But obviously the biggest one now is back six, eight months ago, we got hooked up with an investigative firm that does specialize in trying to identify unauthorized sellers. And we've been working with them and that's probably been over the last short period of time. That's been our biggest bang for the buck as far as providing value to the brands we work with.

That's probably the biggest thing. When we're talking to clients here, that's the biggest thing we face or hear about from our group is unauthorized sellers that, what do you do about them? How do you take them down? How do you make sure you're the one seller of your product? That's the thing. Now is there something on the horizon that these clients, these brands should be looking for or is that just, that's the future. We just need to figure out how to deal with that first.

Yeah, so. Well, actually the other day I was on the phone with, with a manufacturer and they told me it's kind of like whack a mole.

I tell you, look at me.

Yeah, you knock three down and five more come back. But no, what where we're at at the current state and nothing has been announced further than this right now is currently there are a handful of investigative firms out there now that do have various affiliations with Amazon that are authorized. They know all Amazon's terms of services, of what they can and can't do. They reach out to these sellers a certain number of times, usually about three times over about a three week period, trying to determine if that seller is going to communicate back and tell them where they're getting their product at. At that point, if they don't, they can't file a complaint that hey, We've tried to ask them where they're getting their product. We're trying to determine its authenticity. They've chosen not to be a part of that. And normally those listings will be closed down at that point. Some of your larger sellers do have dedicated reps within Amazon that they pay a fee for every month to have those. And those reps will get them reinstated within a matter of a couple hours. But there's other situations now where these investigative firms obviously foreign an additional fee. They can file injunctions in court with Amazon and Amazon will turn over the seller's true identity.

So from the client side, how do we identify those big. Those big players where we hear we have these people selling our product on Amazon? What do we do?

Yeah, like a pharma pack. I mean, those guys are just enormous.

But how do we quickly identify a problem that we can't deal with? You know, like if you're saying these big. These big players can't. We can't really do anything. We shut them down for a couple hours, they come back. How do we identify those? And we just dismiss them because realistically, that's all we can do and we can only hunt these small guys that are. That are fighting against us. How do you find those people?

Yes, sir, sure. So obviously, your mega Amazon sellers, which are going to be your people with, you know, 100,000 feedbacks and the last 12 months or whatever, those types of sellers are going to be easy to identify. For one thing, 99.9% of the time, they do sell, obviously, as the same name as their company. They've got a website, a private website out there outside of Amazon that matches the exact same name they sell under on Amazon. So first of all, you will be able to identify them very quickly, who they are, where they're at and so on and et cetera.

Should we be looking at those as a regional retailer instead of competition to our own store? I mean, if there's nothing we can do about them, are they just a regional that we got to deal with?

I wouldn't say. Well, I would say that at that point, once you've identified who they are, that's when your distribution agreements are going to come into play. And you obviously know they're buying from some of these regional distributors, as were mentioned earlier, These distributors know that, so, and so, you know, Pharmapaks, they know the address, they know where they're at, they know that they're ordering 2,000 units a month of this product.

Yeah, Pharmapak is Pharmapack. Will take that $20 product and put it out there. A $30 product and put it out there for $20?

Yes, sir. But a lot of your distributors do have what I would refer to as maybe a gated products that they will only sell to certain sellers. And that's where your distribution network, in my opinion, needs to be tightened up to the point of where you say, hey, listen, I know that you've got a distribution agreement with us. However, we're going to tell you, you can't sell these seller X, Y and Z, and here's the reason why.

So do we need to. In our distribution agreements, are you seeing that the manufacturers are calling out these players by name, or are they writing agreements that say you can't be providing to Internet resellers?

I've seen both. I've seen both. I've seen it. I'm saying it dealt with both of those ways as well as I've seen pricing increases on the distribution level to make those products essentially unprofitable. On Amazon, obviously, the brands, when they do that, obviously we've communicated with them, and then we've said, hey, the fees on Amazon are $8, they're $12 wherever they are. And then they have to weigh what impact that will have on their brick and mortar stores and other places that may be paying more. Obviously, that's not very, you know, that's not what happens. Usually. Usually they do not do that. But that is another option that we've also seen come about.

Because, I mean, we see this, that. And again, I'm not picking on anybody. I'm not attacking, you know, McKesson or Cardinal or anybody there. It's. It's just the business.

Yes.

So I distribute a product to McKesson because McKesson sells it to 5,000 independent pharmacies. I want to have that pharmacy business. But somebody is calling McKesson and, you know, buying 1,000 pieces at a crack, not six pieces at a crack, and it's going into one of these mega sellers. So what you're saying is either identify you. So someone like yourself, you would identify who these people are?

Yes.

Whether it's a pharma pack, whatever the case is. I would then. Or I would. Or you would go back to McKesson? I guess I would, because I would have the relationship with McKesson. I would go back to them and say, look, you can't sell to pharmapac. And again, not to pick on them. I'm using them as an example. I don't want you to sell to them. So we can do that. That's legit. We can make that happen.

Yes, we've seen people do that. Yes. Obviously.

Restraint of trade issue there or anything?

No, I mean, we've seen other brands do it. The only thing that you sometimes run into is certain national brands. Obviously they've got a situation where they've got, you know, 100 different regional distributors or things of that nature. And then that's when. That's when additional steps need to be taken. We recently had a brand that did special packaging for Amazon. Now that's another level of protection that some brands have done, but that's a whole other animal. Obviously, if you're selling 500,000 units of your product a year, you can't stop to run off 3000 units with special Amazon packaging. But that is obviously something that some brands have started to do.

Do you ever create new configurations just for Amazon?

Yeah.

So this is going to be a three pack versus a one pack or something of that nature.

Yes, we have for a lot of different products. Obviously that's something that you run into issues sometimes with manufacturer. And that's another way a lot of these sellers do get around the map. They take a product that's $25 a piece and they put two of them together and they sell it for 40. You know, obviously the map would tell you that two units should be 50. And then you get in a situation where by doing that, their Amazon fees are slightly lower because they don't pay what's called an Amazon pick and pack fee on two items. They paid on one. So it allows them to sell it cheaper. And that's another issue we've ran into as well, is trying to eliminate or cut back substantially on the multi pack facet on mapped products. But some manufacturers that do not have maps and are more velocity oriented, they've authorized to do that at times. Yes.

So talk to us, if you would, about advertising inside that Amazon ecosystem. Because now when you look at Amazon, if I go to Amazon and type in a product, if I'm on my mobile phone, I don't even see an organic listing anymore. All I see is paid for ads, right?

Yeah. That's what you see.

They've learned from Google.

Yes, they have. Yes, they have. So Amazon is increasingly, I don't know if you saw it. Earlier this year they came out and said that only about a third of the products going to be sold on Amazon moving forward will be actually Amazon as the seller. I don't know if you saw that or not. Which means their Third party marketplace will be two thirds of the sales in theory on Amazon two years ago that was a 5050 split. So that's a big shift.

And why that shift? So they can sell more ad revenue.

Well, that's where I'm going to go with this. My theory obviously, and no one's really said exactly yet, but a lot of the products they dropped were your larger products. But Amazon doesn't want to become just a storage company. They want their fulfillment centers to run efficiently. They want them to be moving product, not storing product. And so essentially I believe obviously they're going to carry products that they have more control over. They're going to launch their own private label products, but then by adding to their income stream, they're going to turn around and there's going to be more and more advertising. You're going to see more of that as we move forward. Some of the clicks you see on Amazon, what you're paying for one click would make Google jealous. In certain highly competitive markets, it's pretty excessive at times, but we monitor obviously our PPC ad campaigns. Adjustments are made depending on the product every week or every two weeks depending on that product and how competitive that market is, et cetera. We make negative keyword changes and things of that nature. We might find out that this word or this ad was clicked 300 times in the last month and it equated to zero sales. So we may make a change that we essentially paid for that word and it didn't help us any. Those are the type things but we do revise those weekly or bi weekly depending on the product.

Is there an advantage? Let's say that I'm using a third party like yourself. Would you be doing the pick and pack yourself or would you be using Amazon as a fulfillment source?

Yeah, we do use Amazon as a fulfillment source 100% of the time now.

And that is big is the main thing because it's just they're more competitive or is it to be able to be a part of the prime system.

So that we would be in identified as a prime seller on the website and the prime identifier that factors in heavily on their buy box, which is the visible main screen when you pull a product up. So usually they very seldom, unless there's a large pricing disparity do they give that buy box to someone that is not prime.

So what jumps out at me here, Rob, is if I'm a manufacturer, if I'm a CPG company and I decide that I'm going to run my own Amazon Page. I've kind of ceased being a manufacturer and I've turned into a retailer at that point, versus if I use a third party such as yourself, I'm really going to treat you as another retail partner, maybe a little closer relationship, but I'm not having to go out and do the keyword bidding. And I'm not worried about photography and things of that nature. Is that a fair assessment?

Yes. We've touched on a couple of these topics, but if you want to be the retailer, you're essentially going to have, depending obviously upon how large your catalog is of products. But some retailers would have one person, you know, essentially running their ppc. That would be a job. And then you would have one other person, you know, filing sales tax for you every month. So we've looked at two different negatives to that side of the business. If you want to be the direct.

Retailer, what I think we need to. And I, I don't know how to do that or how to do this, but it's about reconciling. We have this pricing model from brick and mortar retailers. Right. So it's 50%, roughly. A 50% markup.

Yeah.

Depending on who it is. Walmart, 32 drugstores, 40, 50.

They're paying for human beings in a store, they're paying for a brick and mortar location, they're paying for electricity, they're paying for all of these other things. And that. That's where their pricing comes from. And Amazon doesn't have to deal with that. And if you're selling as a third or fourth party through Amazon, you don't have to deal with that. So we're trying to consult with our clients on how to compete with. We're trying to support brick and mortar because that is still the bread and butter for our clients. But trying to reconcile this cost model against this other cost. We're comparing apples to.

Yes. Cinder blocks.

Yeah. And it's difficult even now. This is a bit of a revelation for me where it's just we're protecting this pricing model against the typical brick and mortar pricing model that has no relevance with Amazon. They don't care. They don't. And I love Amazon, but it's just, it's a matter of how to make it make sense financially, how to still sell it brick and mortar to protect those numbers, because it's still vitally important to these clients. But also understand that the costs associated with the other retail model that we're all used to doesn't apply to the Amazon or the online model. Even if you look at what clients sell on their own websites. They're trying to sell against what Walgreens sells or even higher.

Yeah, and they're usually higher price.

And there needs to be a change of thinking at some point. And I honestly don't know how that'll happen where it just changes everything about how we buy products and everything about how our clients sell products.

See, I like the third party seller model for most clients. One, most clients aren't doing enough volume on Amazon to warrant doing all that sales tax and all these other functions. But what I like about the third party environment is this goes back to my political background, which is plausible deniability because now when my buyer at Walmart goes and looks at my store, my store doesn't say sold by me. Yeah, it's sold by you. And they go, well who's this Joshua guy? And well, he's just a retailer. I don't have any control over him. And I'm not lying because I'm not the seller. It is a third party situation, but it's almost like having a third party, you know, it's almost like having a retail account where the retail account is willing to cooperate with you. I think that's the best way to describe it. I mean, is that a fair assessment of that? And that's assuming you have the right reseller.

Yeah, yeah, I would agree with that. But at the same time I believe that the right third party seller is going to complement in some ways your brick and mortar business. And I believe that they can do that by for example, just as one example, I know that if you walk into a Walmart right now and you walk around and you walk around, you know, for a short period of time, you will look down one of these aisles and you will see someone, you in the beauty aisle looking at their phone. Right. And they're looking at reviews online a lot of times. And that there is no substitute for the fact that I saw it a couple years ago that somewhere around 60%, for example, of even your 18 to 24 year olds, they want to take it home right now. So if they're in a retail store, they're looking at something that they want and they're trying to determine a buy and they pull it up and they see the reviews and there's positive reviews and the negative reviews have replies to them and it all makes sense, they may grab it right now. Statistical facts near the back, the fact that people do glean some type of self gratification by bringing those products home that they bought right this minute. That's how Amazon really made their big boom is because they turned E Commerce into two day shipping. There's only one way to get faster than that and that's to grab it off the shelf that's right in front of you, take it home and you.

Bring up a really good point and that is Amazon today now has more search volume for product reviews than Google does.

Yeah.

I use it for that all the time.

Right. So if you wanted to buy this cup, you would go to Amazon and you would look at the review on it even if you were in the store standing in front of the cup because you want to see what the review is. So as a third party, you would manage those reviews then too, you would, you would be trying to curate those and make sure that they're responded to.

Yes sir. Yeah, we're doing those things. We're working, we've been monitoring reviews for a while, but that's actually a new service we're starting to offer now is we're starting to reply to reviews. Obviously one of the keys is, you know, if you get into a consumable or something of that nature, you need to be very educated obviously on how you reply to those. And so we're working through that, some of that as we speak to make before we openly launch that to the sellers that are the manufacturers that we're working with now, but we're working through, well, essentially setting up an SOP on how we're going to do that.

I think for a lot of smaller to mid size CPG companies, trying to deal with the Amazon maze yourself is literally trying to step into a different business.

Yeah, we were actually talking about that. We do some Amazon storefront build outs and maintenance and advertising for our clients now. And we were talking the other day about how there's almost a social maintenance standpoint for managing the reviews and managing the communications with buyers, etc. That we aren't accustomed to with brick and mortar. And we look at it, this is like a behind the scenes thing for us, but it's a bit of a retainer model where it's a constant maintenance program where you're having to look at what's being said, respond to what's being said that you're not used to. If you're just a brick and mortar seller because you sell a product and they walk away, they go home, they use the product and then you never hear from them again. On Amazon you have to pay attention, you have to be listening to what the users are saying. You have to be paying attention because they'll go there to complain and you need to be there to respond. And it's a little bit of a sidebar to what you're saying, but it was something that came up the other day in a meeting where it changed the way we thought about how we're building our Amazon stores where it's just you have to be paying attention constantly. It's like parenting. You have to be there constantly and, and responding to whatever's happening.

You have to show up with your kids.

Yeah, you do. Sadly.

I know that explains.

But that's what the crazy thing about all of this is. There have been a lot of eye opening things in the last couple of weeks for us where it's just, it is so different from normal retail. It's so hands on and from the client side it's a cumbersome approach that you need somebody to help you do it or it's just, it's, it's, it is social media. It's a different version of social media and social selling, if you will. Just coined a term there, pretty brilliant by the way, Hashtag social selling. But it's just a very different approach that most people aren't used to and the retailers aren't used to.

Yeah. And I think if your brand is big enough that it warrants hiring people like us and, and warrants building the operation, that makes sense. But if your brand's not big enough to move into that business, I think the third party environment makes a lot more sense because it's just another distribution point at that point.

I don't know. I can think of some of our clients who don't have good retail distribution where it makes sense to do it themselves, but it also requires somebody else to manage it for them because it looks like a full time job for a lot of them. They're moving enough product on Amazon but they don't have retail. So I don't know. It's a really interesting shift right now and I'm curious to see what's going to happen as Amazon starts opening brick and mortar, if that's going to balance that or if it's going to make it even more upset. I'm not sure what's going to happen.

So is Amazon going to continue the brick and mortar? I know they were pushing into it and then I read something recently said they were going to pull the plug.

On all of it. Yeah, that's, that's the same thing. I haven't read anything, you know, beyond what you're stating there. So I know that work with a couple companies that do have a relationship with Whole Foods, obviously, who they bought and they're. Well, I know a couple that actually had received information stating that, you know, they weren't going to be there at Whole Foods anymore. So again, I don't know. You know, there could be other factors, obviously there. But I don't know anything beyond what you hear in public reports, obviously, on that.

Now, Amazon is now pushed into the private label business now, too.

Yes.

So just like the retailers. So now you have an issue of. I have my hair care product and my hair care product is doing well. Now I have Amazon, who controls that environment, who can now put up a product that says compare to or, you know, just like. Or same formula as. And I have no control over that, do I?

Nope.

What do I do with that?

Well, that's. I was getting ready to say that that's another variable that's quickly arising. There's lists, you know, all over Google that will tell you who some of their brands are that they have private labeled. That's a very difficult one because obviously they control the marketplace you're in. They control the algorithm that determines what your eyeballs see often. And they also have a lot of the data that would tell them what sellers are going to do, the data that determines compared to. So the thing you're gonna have to run into is there's gonna be ways outside of Amazon that I believe that you're gonna have to differentiate yourself.

And they make it even more difficult than, let's say Walgreens, because Walgreens will copy the packaging and discount the price, but they'll set it on the shelf directly next to me. So at least I have equal billing on that shelf. In that Amazon environment, Amazon's private label is going to come up above me. I'm not going to have equal billing in that environment, am I?

No, that's what I said. You've got to work outside of Amazon where it's Google or all your social media networks or other locations and have a good marketing agency to get you there in front of people.

That's why I often refer to the retailers and Amazon as our CPG frenemies.

Yeah. I mean, it does point to the fact that it's more important, I think, than ever to have a brand, if you're a company, to have a brand, to have something that people seek out. Yeah.

Well, you have a story that tells me why I want to buy that brand. Not the knockoff, why I want to.

Buy that brand for more Money. And I think some people get it immediately. But I do think that that's a very important story to tell. It's creating your brand story is more important now than ever. Especially with that, with Amazon. I mean, they're selling shirts now. I was searching online the other day for French cuff white dress shirts, and Amazon has their own fashion line. I was like, holy shit. And I almost bought one. I was picturing $40 cheaper than the shirt I wanted. I know I didn't do it. I didn't do it.

They have several clothing lines, but I.

Mean, it was just. That was one of my first exposures to Amazon's private label. I was like, are you kidding me? They had shoes and stuff.

Well, no. When someone is at the red carpet and someone says, so what are you wearing?

Jeff Bezos, who dressed me this morning.

What are you wearing? I was wearing Amazon.

I suspect that will never happen. But, you know, maybe I'm wrong, Joshua. I'm wrong once in a while.

What? Any last advice you would give to CPG marketers about Amazon? Anything we missed?

It's E commerce. It's here to stay. You know, it's not going anywhere.

It's not a fad.

No, no, it's not going. It's here to stay. So I would tell them to make sure that whoever their partners are in business are their partners in business. And that is, that is the biggest piece of advice I would advise and make sure that someone is not just a seller of their product, that they actually bring value to them.

Well, Joshua Blake, we appreciate you being with us here on CPG Insiders, folks. If you go to the Show Notes on CPG Insiders, we'll provide you a link on how you can send an email to Joshua if you want to get in touch with him. Other than that, any last thoughts for you, Rob?

I think this is just such a varied and changing landscape all the time. It's important to have somebody who knows what the hell they're doing.

Yeah. Because every 90 days the business is different.

I mean, it's like Google buying stuff on Google. They change the rules. They own the rule book. They change the rules. And it's about working with somebody, a partner, as you said, who is in. In the trenches all the time. I think that's vitally important. You know, that's the key takeaway. I wish there was some sort of huge revelation, but I think that's. That's it. It's just having the right partner who is doing it all the time and not doing it yourself.

If you enjoy the podcast, go to itunes. I Heart Stitcher Leave us five Star Review. If there's any topics or questions that you have that you'd like to have Rob or I or one of our guests talk on the subject, just go to cpginsiders.com send us an email and we'll be happy to pick up on it. Other than that, that's it for the show. We will be back with more episodes in two weeks.

Yeah, something like that.

It's like two weeks.

Hey, hey. It's about two weeks.

It's like two weeks.

You got the money in two weeks.

Joshua, thanks for being with us.

It's great to be here. Thank you.

If you're looking to greatly increase sales on your CPG product, don't hesitate to contact us at Jekyll and Hyde Advertising and Marketing. By the way, the only advertising agency with a guaranteed result. Just go to jekyllheidagency.com or feel free to give us a call at 800542.

Sam.